A potentially tax-efficient way of providing a lump sum cash benefit for the loved ones of an employee or company director should the worst happen and they die.

Relevant life insurance offers a cost-effective way for companies to provide individual death-in-service benefits. The business purchases a policy on an employee’s life, often for directors, and the coverage can be tailored to specific needs. It generally qualifies as a deductible business expense and does not count toward annual or lifetime pension limits.

Even though the business pays for the policy, the money goes directly to the employee’s loved ones when they pass away. This happens because the policy is set up in a trust specifying who receives the money. This trust ensures that the pay-out does not go into the employee’s estate, paid out faster and potentially avoid taxes.